Bankruptcy vs. Consumer Proposal

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What are the pros and cons of filing for bankruptcy vs. Consumer Proposal in Canada?

By declaring bankruptcy, you’re protected from creditors and free from most of your debt, but there are disadvantages to consider as well. It can be confusing trying to decide between Bankruptcy vs. Consumer Proposal.

Many of our customers find alternative debt relief options to bankruptcy that they never considered before speaking with us.

In most cases, a Consumer Proposal is the best option, as it has more advantages than personal bankruptcy.

If your income increases after declaring bankruptcy, your monthly payment will also increase.

With a Consumer Proposal, your payments do not change.

Bankruptcy Advantages

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Stay of proceedings

Calls from collection agencies will STOP! Thanks to the Bankruptcy and Insolvency Act, wage garnishments and threats of lawsuits will also stop immediately.

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Cost effective

A personal bankruptcy in Ontario can costs less than other debt relief options. The exact cost depends on your income and assets.

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Quick process

At David Sklar, we’ll make every process easy for you, but personal bankruptcy is a particularly quick process. Many individuals can receive an automatic discharge within nine months.

Bankruptcy Disadvantages

Negative Impact to your credit score

Your credit report will show a record of your bankruptcy claim for six years after discharge and you will lose all of your credit cards.

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Loss of assets

When you file for personal bankruptcy, your licensed Insolvency Trustee will inform you of the assets can keep, and which you will lose. Your Trustee will calculate the value of the equity you have in your home, your investments, and other non-exempt assets, and distribute the proceeds to your creditors. During the bankruptcy period, any tax refunds you may receive will go to your creditors as well.

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Debts that can not be eliminated

Child support, alimony, fines, and some student loans are excluded. Secured debts (such as mortgages) are also not covered in a bankruptcy.

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Impact on employment

You must consider the fact that declaring bankruptcy may have an impact on your employment situation if you are responsible for money or trust funds. While bankrupt, you are not allowed to work as a director of a company.

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Surplus Income

Surplus income is any income earned above the standards set by the Office of the Superintendent of Bankruptcy Canada. You are required to pay half of any surplus income you earn above that amount.

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Added responsibilities

When you claim bankruptcy, you are required to make your regular payments which are based on your income. You must also attend two credit counselling sessions and send a monthly budget statement to your LIT.

Bankruptcy and surplus income payments

Each year the Superintendent of Bankruptcy outlines what they feel is a basic income for different family sizes. When declaring personal bankruptcy your income and size of your family impact the amount you will need to pay and for how long.

Getting into debt is easy. Getting out is a different story.

But it's still possible!

Did you know there is a Debt Program federally regulated by the Canadian Government, designed to help citizens avoid claiming bankruptcy? This amazing program can only be administered by a Licensed Insolvency Trustee (LIT).

If you’re struggling to make your payments every month and creditors won’t stop calling, we can help.

What our clients are saying.

Based on 774 reviews
Jerry was professional and was easy to deal with
00:09 11/29/22
I was quite nervous and a little embarrassed that I needed financial advice. I met with Jerry Janiec and he was very helpful. He made me feel comfortable and explained everything in easy to understand terms so that I understood what my options were. I would recommend David Sklar & Associates for anyone in my position.
19:53 11/17/22
I was fortunate enough to be referred to David Sklar & Associates Inc. by a family member. Now in the10th month of a Consumer Proposal process, I am very impressed with the organization, professionalism and impeccable customer representation that I have experienced. To this effect, I amparticularly thankful to Jerry Janiec and Rhoda Lewis for their excellent work.
12:21 11/16/22
Recently dealt with Christine at David Sklar & Assoc. and worked out a Consumer Proposal to put forth to my creditors for my Credit Card debt. She was very courteous, professional and put me at ease with a proposal that I can afford on a monthly basis, which will eliminate my debit in a reasonable timeframe. I would recommend Christine and this firm in a heartbeat. Very happy with the service and attention I got !!
01:59 11/15/22
Excellent customer service. Special thanks to Olga for being prompt and helpful. She’s a star. Bibi is helpful as well. Great agency to work with.
19:28 11/14/22
After seeing your commercial play on CP24, I realized that it addressed all the questions and concerns I had about my financial situation. It all started with my one phone call to your office. I had the extreme pleasure of working with Cori Naron at your St. Clair West office in September 2022. She took the time to explain what my options were knowing that it was a very stressful situation with my debt load. She made me feel at ease with my decision to file a consumer proposal and outlined the benefits to me. She is thorough and her attention to detail is outstanding. While it takes a little while to reap the benefits of making this hard decision, she took the time to reassure me that it was in my best financial interest. Well done David Sklar & Associates for having such an amazing representative at your company and for allowing me to "get a fresh start"!
14:31 11/14/22
Very highly perfection individual, well executed and greatly knowledgeable in his work, which guided me me the right decisions making opportunities. Thank you.Sincerely, Peter Romasz
20:18 11/13/22
Trina Powell was very helpful and made the process very easy. Thanks again for all your help.
17:59 11/06/22
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We are David Sklar

Our team of Licensed Insolvency Trustees in Ontario can help you get out of debt and in control of your own financial future. We’ve helped thousands of people and we can help you too. 

We know this is stressful, but you're not alone.

It’s going to be okay.
Book your free consultation today. We’ll do the rest.